Mortgage rates hover near 2025 lows

The 30-year fixed mortgage rate started 2025 around 7%, and after some ups and downs, gradually trended to the low-6% range by the end of 2025. Zillow expects mortgage rates to continue the gradual descent to 6% by the end of 2026. 

Mortgage rates have a tough time breaking through the 6% floor because of the risks of stubborn inflation counterbalancing a slowing labor market. The December Bureau of Labor Statistics (BLS) employment report, released on January 9, will offer the first clean read of the labor market since the government shutdown. 

What’s the impact on housing? 

Though Zillow forecasts only very moderate declines in borrowing costs, 2026 is shaping up as the year for small wins. Affordability is set to gradually improve as modest rises in home values means that incomes can catch up, opening up a wider pool of shoppers able to buy a home. 

If current trends hold, the typical home could once again be affordable to the median household by the end of 2026 — a meaningful milestone after several years of stretched affordability.